New IPA figures show sharp slowdown in ad growth

Growth in UK ad budgets ground to a halt in the fourth quarter of 2015 according to the latest IPA Bellwether Report, produced by Markit.

If we’re going to split hairs it shows that the number of companies planning to increase their ad budgets in Q4 rose by 0.5 per cent, showing that ad budgets have increased for 13 successive quarters. Q3 in 2015 showed a rise of 4.4 per cent while the same period in 2014 showed a rise of 6.1 per cent.

But O.5 per cent is well within anyone’s margin of error so is it hitting the buffers time?

Markit senior economist Paul Smith says: “Companies are maintaining a keen sense of cost-consciousness and a value-for-money approach to their marketing budgets. Such forces have probably weighed on growth in the final quarter of the year.

“We therefore wait to see if Q4 2015 proves to be a nadir in the current cycle or whether we have a little way to go before we again see a sustained upward trajectory.”

None of this comes as a particular surprise. WPP’s Sir Martin Sorrell, something of a bellwether himself, has been warning that worldwide growth is slowing for months now. But the UK ad economy has outstripped most of its rivals for the last two years. So a slowdown in the UK will have a knock-on effect elsewhere too as the big marcoms holding companies revise down their budgets – which usually means redundancies.

It’s not all doom and gloom. A net 24.6 per cent of advertisers expect to see an increase in their ad budgets in 2016 but that, presumably, reflects increases already in the pipeline. Internet advertising is still the strongest sector, growing by 6.9 per cent in Q4.

But times, despite some rather optimistic recent forecasts from a number of big media agencies, are about to get tougher.